Using a computerized Inventory Management System, a Paint Supply Store franchise continuously monitors the inventory of all the paint located at each of their 15 stores and their distribution warehouse. The Paint Supply Store franchise sells an average of 40 gallons of Orange Paint every week (for 52 weeks per year). Their current policy is that when they place an order for Orange Paint from their supplier, they order 75 gallons at a price of $2.50 per gallon. [The company does not hold Safety Stock] It takes 1.50 weeks to receive an order from the supplier. Administrative costs for Ordering paint have been estimated to be $20 per order. Holding Costs = 25% of the purchase price per gallon per year. What is the Total Annual Inventory Cost for the company's current policy?

A.

$578.10

B.

$498.17

C.

$120.63

D.

$564.04

E.

$812.50

Reorder Point, ROP = dL + SS Service Level z Value 99.99% 3.719 d = Average Demand Rate per Time Period 99.90% 3.090 D = Demand Rate per Year 99.00% 2.326 L = Average Lead time time periods) 95.00% 1.645 90.00% 1.282 SS = Safety Stock = 2 0 al 85.00% 1.036 OAL = Loa 80.00% 0.842 (Assuming Lead Time is constant as in Periodic review) a = Standard Deviation of the demand z = Number of Standard deviations corresponding to a service level - Q = Order Quantity Average Inventory Level = Q/2 + SS H = Holding Cost Per Year Per Unit S = Ordering/Setup Cost Per Order Total Annual Inventory Cost = (9)h + @)s +H(SS) + 2DS H Time Between Economic Order Quantity, EOQ = EOQ Orders = TBO = D